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Providence Service Corporation Reports Q2 2012 Results
Highlights:
- Revenue rose 18.5% over last year's second quarter to $278.9 million
- Second quarter diluted EPS of $0.11
- Net cash provided by operations totaled $7.9 million
- Quarter impacted by expenses associated with the consideration of strategic alternatives, stock compensation expense due to the passing of a director and higher than expected healthcare claims

TUCSON, Ariz., Aug. 8, 2012 /PRNewswire/ -- The Providence Service Corporation (Nasdaq: PRSC) today announced its financial results for the second quarter ended June 30, 2012.    

For the second quarter of 2012, the Company reported revenue of $278.9 million, an increase of 18.5% from $235.3 million in the comparable period in 2011.  Revenue from Providence's non-emergency transportation (NET) services segment grew 33.0% to $188.8 million in the second quarter from $142.0 million in the prior year period, benefitting from new contract wins.  Revenue from the social services segment declined 3.5% to $90.1 million from $93.3 million in the second quarter of 2011.  Social services revenue was impacted primarily by select workforce development reductions in the U.S. and Canada.

Net income was $1.4 million, or $0.11 per diluted share, in the second quarter of 2012 compared to net income of $7.6 million, or $0.55 per diluted share, in the second quarter of 2011 including a $0.20 per share gain related to a June 2011 acquisition.  Impacting the second quarter 2012 results were previously announced expenses of approximately $519,000 associated with the company's consideration of strategic alternatives, unbudgeted stock compensation expense of $285,000 associated with the acceleration of vesting of restricted stock grants due to the passing of a company director and higher than expected expense due to increased healthcare claims activity under the company's self-funded employee health plan in an amount approaching $800,000. 

Providence's direct social service client census was approximately 53,000 at June 30, 2012 compared to 59,100 at June 30, 2011.  Total direct contracts numbered 629 at June 30, 2012 compared to 647 at June 30, 2011.  The decrease in the number of contracts was primarily due to tutoring reductions.  The Company had approximately 13.6 million individuals eligible to receive services under its NET contracts at June 30, 2012 an increase of 42% from approximately 9.6 million at June 30, 2011. 

For the first six months of 2012, the Company reported revenue of $539.1 million, an increase of 16.4% from $463.1 million in the first six months of 2011.  Revenue from Providence's NET services segment grew 25.8% to $353.5 million in the first half of 2012 from $280.9 million in the prior year period.  Revenue from the social services segment increased 1.9% to $185.6 million, up from $182.2 million in the first half of 2011.

Net income was $4.5 million, or $0.33 per diluted share, in the first half of 2012.  This compares to net income of $12.0 million, or $0.90 per diluted share, in the first half of 2011 which included a non-cash charge of approximately $2.5 million, or $0.11 per share, related to the write-off of unamortized deferred financing fees of its senior credit facility offset by the $0.20 per share gain related to a June 2011 acquisition.

At June 30, 2012, the Company had unrestricted cash and cash equivalents of $50.2 million.  During the first half of 2012, the Company generated a total of $17.1 million in cash from operations.  At June 30, 2012, the Company had long term liabilities of $159.1 million, down from $179.1 million at June 30, 2011.

"LogistiCare had a solid second quarter and has been successful in its multi-market launch," said Fletcher McCusker, Chairman and CEO.  "As we finish ramping up the New York City contracts, we expect approximately $500,000 of remaining start up expense in the second half, making the new contract investment for the year a little over $3.5 million, or approximately $0.15 a share, much higher than expected.  After third quarter seasonality, the fourth quarter should be a more normalized quarter for us in terms of a run rate into 2013."  

"On the social services side, we experienced a strong renewal cycle with the exception of tutoring.  In 2013 and beyond, our opportunities should be enhanced by the recent U.S. Supreme Court decision providing for state led voluntary increases in Medicaid enrollment, fully funded by the federal government.  A number of states have already announced implementation plans for Medicaid expansion with only eight states having announced their intention to opt out.  Current estimates by Open Minds call for Medicaid to increase by 11 million enrollees versus 15 million enrollees under the initial reform legislation."

Guidance
The Company has elected to withdraw previously issued earnings guidance for 2012 citing a number of unknowns including continued and unpredictable start up costs related to LogistiCare's multiple contract wins, new contract opportunities for the NET segment, new bidding activity in Canada and recent social services wins in a Southwest and Midwest state along with managed care transitions in a number of states.

Conference Call
Providence will hold a conference call at 11:00 a.m. EDT (9:00 a.m. MDT and 8:00 a.m. Arizona and PDT) Thursday August 9, 2012 to discuss its financial results and corporate developments. Interested parties are invited to listen to the call live over the Internet at http://investor.provcorp.com or http://www.earnings.com.  The call is also available by dialing (800) 510-0146 or for international callers (617) 614-3449 and by using the passcode 50301708. A replay of the teleconference will be available on http://investor.provcorp.com and http://www.earnings.com. A replay will also be available until August 16, 2012 by dialing (888) 286-8010 or (617) 801-6888, and using passcode 30949683.

About Providence
The Providence Service Corporation, through its owned and managed entities, provides home and community based social services and non-emergency transportation services management to government sponsored clients under programs such as welfare, juvenile justice, Medicaid and corrections.  Providence is different from many of its competitors in that it provides its social services primarily in the client's own home or in community based settings versus treatment facilities or hospitals and provides its NET management services through local transportation providers rather than owning its own fleet of vehicles.  The Company provides a range of services through its direct entities to approximately 53,000 clients through 629 active contracts at June 30, 2012, with an approximate 13.6 million individuals eligible to receive the Company's non-emergency transportation services.  Combined, the Company has an approximately $1 billion book of business including managed entities.

Forward-Looking Statements
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believe," "demonstrate," "expect," "estimate," "forecast," "anticipate," "should" and "likely" and similar expressions identify forward-looking statements. In addition, statements that are not historical should also be considered forward-looking statements. Readers are cautioned not to place undue reliance on those forward-looking statements, which speak only as of the date the statement was made. Such forward-looking statements are based on current expectations that involve a number of known and unknown risks, uncertainties and other factors which may cause actual events to be materially different from those expressed or implied by such forward-looking statements. These factors include, but are not limited to the global credit crisis, capital market conditions, the implementation of the healthcare reform law, state budget changes and legislation and other risks detailed in Providence's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2012. Providence is under no obligation to (and expressly disclaims any such obligation to) update any of the information in this press release if any forward-looking statement later turns out to be inaccurate whether as a result of new information, future events or otherwise.

--financial tables to follow--

The Providence Service Corporation

Consolidated Statements of Income

(in thousands except share and per share data)

(UNAUDITED)












Three months ended


Six months ended



June 30,


June 30,



2012


2011


2012


2011

Revenues:









  Home and community based services


$           78,624


$           81,336


$        162,749


$        158,580

  Foster care services


8,363


8,669


16,718


16,920

  Management fees


3,113


3,335


6,109


6,680

  Non-emergency transportation services


188,837


141,970


353,508


280,936



278,937


235,310


539,084


463,116










Operating expenses:









  Client service expense


76,528


77,405


156,738


150,219

  Cost of non-emergency transportation services


180,639


132,227


337,618


258,336

  General and administrative expense


13,791


12,413


26,530


24,337

  Depreciation and amortization


3,610


3,329


7,235


6,577

Total operating expenses


274,568


225,374


528,121


439,469

Operating income 


4,369


9,936


10,963


23,647










Other (income) expense:









  Interest expense


1,909


2,331


3,816


6,062

  Loss on extinguishment of debt


-


-


-


2,464

  Gain on bargain purchase


-


(2,711)


-


(2,711)

  Interest income


(43)


(49)


(84)


(108)

Income before income taxes


2,503


10,365


7,231


17,940

Provision for income taxes


1,085


2,799


2,771


5,905

Net  income 


$             1,418


$             7,566


$            4,460


$          12,035










Earnings per share:









  Basic


$               0.11


$               0.57


$              0.34


$              0.91

  Diluted


$               0.11


$               0.55


$              0.33


$              0.90










Weighted-average number of common shares









  outstanding:









  Basic


13,301,188


13,235,837


13,283,948


13,229,238

  Diluted


13,417,966


14,821,295


13,411,300


14,910,276

 

The Providence Service Corporation

Consolidated Balance Sheets

(in thousands except share and per share data)

(Unaudited)



June 30,


December 31,



2012


2011

Assets





Current assets:





    Cash and cash equivalents


$                50,179


$                 43,184

    Accounts receivable, net of allowance of $4.8 million for





     2012 and $5.8 million for 2011


93,608


87,163

    Management fee receivable


2,601


3,537

    Other receivables


2,590


1,601

    Restricted cash


3,623


4,654

    Prepaid expenses and other


24,247


15,989

    Deferred tax assets


-


1,965

Total current assets


176,848


158,093

Property and equipment, net


31,437


28,563

Goodwill


113,850


113,737

Intangible assets, net


55,733


59,474

Restricted cash, less current portion


10,953


10,882

Other assets


11,102


8,304

Total assets


$              399,923


$               379,053

Liabilities and stockholders' equity 





Current liabilities:





    Current portion of long-term obligations


$                11,250


$                 10,000

    Accounts payable


6,236


4,461

    Accrued expenses


29,851


30,654

    Accrued transportation costs


58,969


47,657

    Deferred revenue


3,882


2,194

    Reinsurance liability reserve


14,660


11,921

    Deferred tax liabilities


180


-

Total current liabilities


125,028


106,887

Long-term obligations, less current portion


134,243


140,493

Other long-term liabilities


13,203


9,740

Deferred tax liabilities


11,674


12,910

Total liabilities


284,148


270,030

Commitments and contingencies





Stockholders' equity:





       Common stock:  Authorized 40,000,000 shares; 





         $0.001 par value; 13,700,578  and 13,621,951





         issued and outstanding (including treasury shares) 


14


14

    Additional paid-in capital


178,690


176,172

    Retained deficit


(57,101)


(61,561)

    Accumulated other comprehensive loss, net of tax


(1,184)


(1,128)

    Treasury stock, at cost, 634,878  and 623,576 shares


(11,605)


(11,435)

  Total Providence stockholders' equity


108,814


102,062

    Non-controlling interest


6,961


6,961

Total stockholders' equity 


115,775


109,023

Total liabilities and stockholders' equity 


$              399,923


$               379,053






 

The Providence Service Corporation

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)



Six months ended



June 30, 



2012


2011

Operating activities





Net income 


$          4,460


$     12,035

Adjustments to reconcile net income to net cash 





  provided by operating activities:





  Depreciation 


3,442


2,721

  Amortization


3,793


3,856

  Amortization of deferred financing costs 


567


955

  Loss on extinguishment of debt


-


2,464

  Gain on bargain purchase


-


(2,711)

  Provision for doubtful accounts


627


1,534

  Deferred income taxes


728


(123)

  Stock based compensation


2,500


1,809

  Excess tax benefit upon exercise of stock options


(48)


(3)

  Other


(21)


384

  Changes in operating assets and liabilities:





    Accounts receivable


(9,916)


732

    Management fee receivable


936


1,247

    Other receivables


(989)


1,282

    Restricted cash


(20)


(34)

    Prepaid expenses and other


(9,244)


(7,610)

    Reinsurance liability reserve


2,859


3,468

    Accounts payable and accrued expenses


977


(640)

    Accrued transportation costs


11,313


2,398

    Deferred revenue


1,693


(2,128)

    Other long-term liabilities


3,445


228

Net cash provided by operating activities


17,102


21,864

Investing activities





Purchase of property and equipment, net


(6,329)


(6,530)

Acquisition of businesses, net of cash acquired


(190)


(6,463)

Restricted cash for contract performance


980


1,426

Purchase of short-term investments, net


461


(58)

Net cash used in investing activities


(5,078)


(11,625)

Financing activities





Repurchase of common stock for treasury


(169)


(51)

Proceeds from common stock issued pursuant to 





  stock option exercise


222


33

Excess tax benefit upon exercise of stock options


48


3

Proceeds from long-term debt


-


110,000

Repayment of long-term debt


(5,000)


(124,780)

Debt financing costs


(29)


(2,606)

Capital lease payments


(17)


(8)

Net cash used in financing activities


(4,945)


(17,409)

Effect of exchange rate changes on cash


(84)


75

Net change in cash


6,995


(7,095)

Cash at beginning of period


43,184


61,261

Cash at end of period


$        50,179


$     54,166

 

 

SOURCE The Providence Service Corporation

Fletcher McCusker - Chairman and CEO, +1-520-747-6600, or Alison Ziegler, Cameron Associates, +1-212-554-5469

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